On 6th January 2025, the Office of Securities and Exchange Commission (“SEC”) of Thailand has proposed significant amendments to margin loan regulations, signaling a proactive approach to bolstering market stability and risk management.
Key Legal Implications:
1. Revised Initial Margin Requirements
- The proposed increase in initial margin rates for newly listed and IPO shares aims to mitigate the risk of collateral insufficiency. This change underscores the SEC’s recognition of heightened volatility in such securities and their potential to exacerbate credit risks.
2. Stricter Lending Criteria
- Aligning lending limits with the financial standing of securities firms introduces a more stringent framework for determining a company’s capacity to extend credit.
- Concentration limits on individual customers and specific collateral types aim to prevent overexposure, which has historically led to systemic risks.
3. Elimination of Investment Units as Collateral
- Removing investment units from the list of eligible collateral reduces the likelihood of forced sales triggering a domino effect on the net asset value of other units.
4. Enhanced Margin Call Procedures
- The mandate for timely margin calls and repayment aims to improve credit risk management and reduce the likelihood of defaults.
5. Restrictions on Loan Purposes
- Limiting margin loans to securities trading activities eliminates their misuse for non-permissible transactions, such as related-party dealings or speculative acquisitions.
SEC Proposes Stricter Margin Loan Rules to Protect Market Stability_Bangkok Global Law